Nyab AB (publ) (NYAB) Earnings Call Transcript & Summary

Welcome to NYAB Q3 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead.

Hello, everyone, and welcome to Nyab's results presentation for the third quarter of 2025. Nyab has today released its interim report. And with us in this call, we have the Group CEO, Johan Larsson; and the Group CFO, Klas Rewelj. My name is Erik Petersen, and I'm the VP of Corporate Affairs and Head of Communications and Investor Relations at Nab. Participants who wish to ask questions or management present are welcome to join the teleconference via the link in the invitation where also the dial-in details will be provided. You may also submit questions in the chat. And now to get started, I hand over to Johan, who will go through the results.

Thank you, Erik, and welcome. So we clearly continue our work to build a bigger and stronger company. We have a solid progress in the third quarter with high growth and an increased operating profit and our margins remain at healthy levels. Swedish margin is, of course, impacted by the strong growth. Note that in Civil engineering in the quarter had a growth of 67%. We have a high market activity in Sweden and the underlying order intake trend remains solid. Order backlog on a continued high level, which provides a robust platform forward. So year-over-year, we have a growth of 60% in the quarter, 32% organic. And as I mentioned earlier, in our original core business, Civil Engineering Sweden, we have a growth of 67% in the quarter. And rolling 12, the growth looks pretty much the same as you do in the quarter for the company as a group. Our operating profit grows, I think a growth of 27% year-over-year in the quarter, but a really impressive number, our rolling 12 growth of 53%. And our order intake is strong. Worth mentioning is that we have additional orders and also additional EBIT in our joint venture at a quite low level since we are in Phase 1 with the Uppsala Tremway project, but that's worth mentioning at least. Year-over-year, our order intake decline with 11%. I would say that, as mentioned, the order in the joint venture would take us up to a different number. And of course, it's a quarterly effect, and we have a clear ongoing trend of growth going forward as well. And rolling 12, we are on pretty much the same level. And the backlog is up 6% year-over-year, remains at a healthy level. We are selective in our growth, choose the right projects and in the right segments. And of course, an increasing amount of the contracts are different sorts of collaborative contracts. And of course, we have a couple of collaborative contracts where we are in Phase 1 at the moment that hopefully and most likely will get into a Phase 2 where you have the contracted volume, so to speak. And the selection of new contracts, the Uppsala Tremway, it's a collaborative contract for Phase 1 in a joint venture with us. We have 2 energy EPC contracts that are signed in September that has quite a high value for our Finnish business. And also related to that we finally see Finnish market overall having a positive trend and a lot of more activity coming up there. So we're happy to have a new view on the Finnish market going forward. And very important for our Finnish business as well is the Fingrid Class A approval which we received during the quarter, and that heavily strengthens our position in the Finnish energy market for the biggest and most complicated transmission line contracts. And when it comes to our long-term financial targets, revenue growth exceeding 10% as the first target. At the moment, we are at 61%, rolling 12. So looks quite good. When it comes to profitability, an EBIT margin exceeding 7.5%. As we have stated earlier that this won't be a year when we view it as possible to reach our goal, mainly from the fact that we have a dilution of our margin since our acquisition of our consulting business, which we happily are margin improving as we speak. But rolling 12, the outcome is 5.9%. And the capital structure, we want a net debt in relation to EBITDA below 1.5. And we have close to no net debt whatsoever. So a lot of room for the future going forward. And the direct shareholder return, we want to have a dividend exceeding 35% on net profit. And so far, we have been well above our target. And with that, I leave over to Klas.

Thank you, Johan. I take potentially some reiterations and more details on the group financials, and we start with the revenue side. As you heard, the third quarter revenue was EUR 150.1 million, and that, as said, represents a growth of 60% in relation to previous year comparison period. The organic growth component high 32%, where the driver remains mainly our Swedish project activity and in particular, in this quarter. The quarterly year-on-year acquisitive growth effect linked to the Dovre acquisition was 28% calculated. Our rolling 12 months revenue, EUR 510 million now, representing a growth of a full 61% against the comparison period, where the organic growth component there, 35%. Taking a look at the profitability side, third quarter operating profit, EUR 11.3 million is an increase over the comparison period with 27%. Net of IFRS item effects, the Dovre business contributed to quarterly operating profit increase with EUR 0.6 million this quarter. The operating margin consolidated was 7.5%, where we see the expected dilution against comparison period from the Dovre acquisition, as Johan mentioned. Our rolling 12 months operating profit increased to above EUR 30 million, and that is in percentage a 53% increase to the comparison period. Equally, our earnings per share, EPS increased with a full 94% on that same 12-month basis. Okay. Our financial position. The free cash flow for the third quarter was a positive EUR 9.3 million. That is a strong conversion well over the comparison period. And the result from that was then, as Johan said, a small net debt of EUR 1.8 million, giving a minimal ratio to EBITDA of 0.05. Thus, we are now back at the level we saw before the Dovre acquisition. Adjusted for that same acquisition payment, the rolling 12-month free cash flow represents a cash conversion to EBITDA of 111%. Return on capital employed was 14.2%. That return measure continues to increase following an improved sales to capital employed ratio as a lever. Okay. We now take some more deep dive into the business segments and their financial highlights, starting with Civil Engineering with Civil Engineering then represented by our legacy Nyab business, construction projects in Sweden and Finland. For that segment, the market activity remained at a very high level in the quarter with tender values resulting in that well above last year. And we have several strategic attractive bids in our pipeline. Order intake was EUR 101.6 million there. That is a decrease with 23% against the quarterly high comparison number, whereas the underlying trend for order intake remains really solid. The 2 large EPC contracts signed in the quarter gives a good base for our Finnish operations ahead. Total order backlog showed an increase of 6% over the comparison period and remains really well balanced and includes healthy margins. Profit and loss, the Civil Engineering quarterly revenue increased with 32% to EUR 122.2 million. The segment's operating margin in the quarter was 8.4%. The growth was driven by Sweden with high activity and an operating margin somewhat impacted by the growth, the high growth, including capacity buildup to meet the activity and demand. Our Finnish operations is currently showing reduced revenue over the comparison period, having finalized large project assignments and still waiting to start up the activities from the new ones. The margin for Finland was improved in the quarter. For the total Civil Engineering, the rolling 12-month operating profit shows an increase of a full 54% over the comparison period, fully organic with a margin of 7.2%, then thus remaining in the solid range versus our financial target. Okay. We move to the Consulting segment. That is our new business with the acquired Dovre combined with the system operations in Finland as a total. We saw that the offshore market, important for Dovre showed some retractions during the quarter with a lot of project completions and combined with a somewhat cautious new investment level. We saw positive demand and order development from the public sector in Norway. Quarterly [indiscernible] and book-to-bill was low, whereas the short-term trend with number of assigned consultants increased during the quarter. Consulting revenue thus result in EUR 28.3 million with an improved margin of 4.5% versus previous quarters. We continue to progress integration of Dovre, including increased financial clarity and strengthened management for a further Nordic expansion as the plan is. That was a short summary of the financials. Johan, over to you to summarize our message here.

Thank you, Klas. Yes. To sum it up, we have a high growth, and we have an increased operating profit. our margins, happy to say that they remain at healthy levels. As I said, the Swedish margin is, of course, impacted by the strong growth. It's our own choice. The market is there. The clients are there and they want to expand their collaboration with us. So of course, it's not sustainable in the long run to have 67% growth in the quarters. But it's full under control, and I feel very satisfied with our performance. The market conditions in our core geographies continue to differ. It's a very high activity in Sweden. If you view it clearsighted, the only thing where you have a real problem is, of course, housing, and we don't do housing. We're not a big at hog, but there are a lot of activities related to that market that are quite suitable to us. But otherwise, very high activity, a lot of demand within energy and infrastructure. And it's quite clear that the demand is growing. And there are -- it's more cautious in Finland, but Finland is clearly improving. We've been in the bottom. And in Norway, we see some slowness coming up now going into 2026. Solid underlying order intake trend and our order backlog are on a high level, and we have a real robust platform going forward. And our financial position is supported by our strong free cash flow. I would say, for this business and for this industry, an extreme strong free cash flow even, which we have always had and aim to continue to have. We have a low net debt -- and as always, we have been on a more than decade-long growth journey with good and healthy margins, and we continue to grow very selectively and we are well positioned for both the remainder of the year and for the year to come.

Thank you, Johan, and thank you, Klas, for the presentation. We will now open up the teleconference for questions on the link provided in the invitation.

[Operator Instructions] The next question comes from Simon Johnson from ABG Sundal Collier.

First, I have a question on margins in Civil Engineering, Sweden specifically. And here, you said that it was impacted by high growth, which I think makes a lot of sense. But can you maybe share a bit more details or specifics about that? You mentioned some of it, but maybe a bit more specifically if there are some costs isolated to Q3 here or if we should sort of have it as a base scenario that the margins will remain at these levels as long as the growth remains this high? Can you maybe elaborate a bit on that?

Simon, thanks for the question. Naturally, at this level and size we are now together with the increasing size of projects, it would be very irresponsible not to take costs in advance to prepare for these coming projects. So for natural reasons, our very well explained growth model, CapEx light and a lot of work done by subcontractors and such works perfectly with no hit on the margin if we have a growth that are in the level of 20% to 25% within Civil engineering. But it's an exceptional market and the clients want both more from us, closer collaborations and a bigger undertaking from our part, and we answer to that. So I would say as soon as our growth levels are a bit lower than this, we will immediately quite heavily improve the margin in Civil Engineering. But I would still underline that they are still at a healthy level even when we go this fast.

Yes. No, I agree on that. And I think it's worthwhile to stress our 12-month performance over that type of period as well. And we continue to manage the civil engineering towards our financial target. And we stay both for Sweden as well as total with Finland in the solid range as we say. And I think that's a good indication of how we hope to perform in the future as well.

All right. Makes a lot of sense. Then on market activity, Norway specifically for consulting business, you talked about some slowdown in activity. So I'm just curious how we should view that for Dovre's growth next year? And if you if you expect that, that business can still grow even if there's a slight slowdown?

Yes. I would say that, of course, as we have stated, our focus on Dor is the margin improvement. It's not volumes. So as you see, we have made quite good progress on the margin side. So we continue with that work going forward. And of course, it's more difficult to both grow and maintain volumes in a declining market. But we will see. Of course, there are markets outside of Norway as well with the consulting business.

[Operator Instructions] The next question comes from Christoffer Jennel from Inderes.

It's Christoffer from Inderes. A couple of questions from my side, and I take them one by one, if that's okay. I just wanted to expand slightly on the previous questions on Dorre and the margins that we saw now in Q3. Would you say that they were like any one-off effects that benefited margins now in Q3? Or is the synergy realization progressing better than expected and these are the levels that we can expect going forward for the Consulting segment?

Well, I mean, the margins on a short term and a quarterly basis can go up and down. I think we remain focused on that the consulting business over time will be accretive to our operating margin in total for Nia, but it will take some time to get there. I think we focus on developing the business short term, medium term, long term with a more value-based offering, very client-centric team approach. So I think that's our focus on it to answer it a little bit broadly.

Okay. That's helpful. And then I wanted to switch to the order backlog. Would you say that you are satisfied with the current composition of the order backlog in terms of the sector exposure, the customer mix and execution time line heading into 2026? Or are there any areas where you would like to strengthen before year-end?

We are quite happy overall at this stage in this phase. We have always run our growth journey in a way that we are never pushed or have to take any contracts. So we are on a solid position, stand strong and are very selective going forward. Of course, there are like 2 months left of the year. And with all certainty, the order intake will be there during these 2 months as well. And whatever gets into our order book is what we want.

Right. And then a question on the Fingrid Class A approval. How would you say that, that impacts your growth expectations for the Finnish operations in 2026 and beyond?